Means to an End

Shortly before David Schubbe and his wife, Kristi, planned to enter retirement, he consulted a financial planner because it seemed like a good idea. At the very end of one of their planning sessions, their advisor gently suggested that he and his wife consider long-term care insurance. This kind of insurance pays for medical, personal, and social services at home or in an assisted-living or a nursing facility.

The Schubbes come from good stock; several aunts lived well beyond their 100th birthdays, and an uncle or two are now in their late 90s. So it seemed likely that the Schubbes had many years ahead and would possibly benefit from purchasing a long-term care plan. The Schubbes settled on a joint policy, which cost the couple about $3,000 a year. David Schubbe retired at the end of 2003, he says, “and then, over the next couple of years, I watched my Kristi’s Alzheimer’s unfold.”

At first, it was routine forgetfulness. But by 2005, she could no longer remember him as her husband, and needed around-the-clock care. After struggling to maintain his wife’s quality of life, Schubbe made the painful decision to admit his wife of 46 years into The Wellstead of Rogers, a private-pay dementia- and Alzheimer’s-specific assisted-living residence in Rogers. Within about 30 days of that time, Schubbe’s long-term care policy began paying benefits. The policy he bought in 2001 now pays an annual bill of almost $70,000 a year, an amount that he freely admits would be “financially devastating” if he had to pay it himself.

The State of Minnesota is really hoping that a lot more people reaching retirement age realize the importance of buying long-term care insurance. The state recognizes that aging baby boomers could eventually put enormous pressure on state and national health care facilities, and may stress Medicaid, the federally funded program that pays for long-term care for some people.

The Minnesota Long-Term Care Partnership is a new public-private partnership designed to help offset those costs, and is meant to encourage individuals and couples to purchase long-term care insurance.

According to the program Web site, mnltcpartnership.org, Minnesotans will be able to keep more of their assets if they require Medicaid down the road when they purchase a policy that is qualified through the partnership. Without a qualified policy, Minnesotans must spend down their assets to $3,000 to get state-funded medical assistance. Recent changes in federal law have restricted the ability of individuals and families to use estate planning techniques to transfer assets and “artificially impoverish” themselves to qualify for state assistance for long-term care.

The Long-Term Care Partnership site says that a person who buys a policy worth $100,000, for example, can apply for medical assistance after those benefits have been used and medical assistance will not count $100,000 of their assets toward the $3,000 asset limit. For a healthy 55-year-old, such a policy typically costs between $60 and $90 a month, if we factor in a state tax credit of $100 per year.